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International Journal of Humanities and Social Science Invention
ISSN (Online): 2319 – 7722, ISSN (Print): 2319 – 7714
www.ijhssi.org ||Volume 6 Issue 10||October. 2017 || PP.43-46
www.ijhssi.org 43 | Page
The Role of Cooperative in the Indonesian Economy
Azhari 1 Mohd. Nur Syechalad2, Ishak Hasan3, and M. Shabri Abd. Majid4*
1(Ph.D Scholar, Faculty of Economics and Business, University of Syiah Kuala, Indonesia)
2(Lecturers, Faculty of Economics and Business, University of Syiah Kuala, Indonesia)
3(Lecturer, Faculty of Economics and Business, University of Teuku Umar, Indonesia)
Corresponding author: mshabri@unsyiah.ac.id
Abstract: This study aims to evaluate descriptively the existence and role of cooperatives in the Indonesian
economy. In 2016, the number of cooperatives in Indonesia reached 212,135 units with a total membership of
15% of the total population of Indonesia. 30% of cooperatives in Indonesia have been inactive for various
reasons. The cooperative has contributed less than 2% to the Indonesia's gross domestic product and offered
0.5% job vacancy for the entire working population of Indonesia. The following suggestion is provided for
further enhancing the contribution of the cooperative to the Indonesian economy, namely: (1) Increasing the
participation of cooperative members; (2) Providing a conducive climate for cooperatives, access to finance
and business development; (3) Increasing counseling and training for managers, supervisors and apparatus for
co-operatives; and (4) Encouraging Micro-Small and Medium Enterprises (MSMEs) to establish secondary
cooperatives.
Keyword: Cooperative; member; capital; turnover; economic growth; labor; Indonesia
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Date of Submission: 16-10-2017 Date of acceptance: 31-10-2017
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I. Background
The cooperative in Indonesia was first established in 1896 by a Mayor in Purwokerto (Nasution, 1990).
The establishment of a cooperative at that time was to protect the citizens from being trapped in loan sharks.
Type of established cooperative was saving and loan cooperatives. This business entity developed into the
agricultural sector cooperatives. Then in 1908 and 1911, Boedi Oetomo and Syarekat Islam advocated
establishing a cooperative as a means of economic struggle at the time. After Indonesia gained its independence
in 1945, the cooperative was explicitly incorporated as the basis of a nation-based economy based on article 33
paragraph one of the 1945 Constitution.
Until 2016, the number of cooperatives in Indonesia reached 212,135 units with a total membership of
37,783,160 people (Ministry of Cooperatives and SMEs, 2016). Of those cooperatives, 30% were inactive for
various reasons. There are several factors that trigger the cooperatives were inactive, such as the low human
resources of cooperatives, cooperative management was not professional, cooperative members' participation
was still lacking and mastery of the technology was inadequate. Besides, there were some cases of cooperatives
that did deviations in managing cooperatives, so that the distrust of the community to cooperatives was
increasing.
Looking at the releases issued by the International Cooperative Alliance (ICA) in www.monitor.coop,
many cooperatives in the United States fill the list. 300 major cooperatives in the world, the first rank was a
cooperative Zenykoren from Japan that engaged in the insurance sector. Followed by Acdlec Electry Coop
France, in the trade and services sector, and ranked third was the State Farm United States that engaged in the
insurance sector. The cooperative of Indonesia, Gresik cement co-operatives were ranked 232 in 2013 and
ranked 210 in 2012. Meanwhile, according to the Minister of Cooperatives and SMEs, Gede Puspayoga (2016),
Indonesia managed to penetrate the world's cooperative, the Telkomsel Cooperative (Kisel) which was ranked
123 out of 300 world cooperatives. Of the 300 best cooperatives in the world, Indonesia has only one co-
operative, while the United States has the 100 best cooperatives from the top 300 cooperatives in the world.
Based on the above background, this study aims to evaluate the contribution of cooperatives to the
Indonesian economy. Cooperatives also contribute to reducing poverty, unemployment and improving people's
welfare (DeVille et al., 2007). In addition, cooperatives in Indonesia are able to absorb labor by 0.5% of the
total working population (Ministry of Cooperatives and SMEs, 2016).
To achieve the purpose of this study, this study used descriptive analysis. This study focuses on the
existing data on cooperatives, such as capital, turnover, profit, and cooperative labor.
The rest of the study is organized in the following sections. Section 2 provides the literature and
discussion of the results, and section 3 concludes the paper.
The Role of Cooperative in the Indonesian Economy
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Capital, Turnover and Profit of the Cooperative
Cooperatives established for the welfare of members and society in general. The cooperative has values
based on self-help, self-responsibility, democracy, equality, equity and solidarity (ICA, 1995). Cooperative in
running its business is more concerned with its members than to seek the maximum profit that is commonly
done by business entities other than cooperatives. However, far from the purpose of seeking profit, the
cooperative has a basic purpose to improve the welfare of members in particular and society in general.
Cooperatives run their business in accordance with the needs and economic efforts of its members. Laurinkari
(2004), states that the purpose of the cooperative is the empowerment not only on economic, but social and
psychological for its activities. This means that the cooperative is not solely aimed at making a profit but far
from it is to achieve prosperity together. Cooperatives put forward the strength of members rather than the
strength of capital (Henzle, 1960). According to Michelsen (1994: 16) Cooperative is a membership
organization that can determine business. It can be understood that members of the cooperative are run by
members as users of the services / goods and as business owners of the business.
In running its business, cooperatives develop member economic business, not non members. Because
the purpose of the cooperative is basically to improve the welfare of members. However, it does not rule out the
possibility of cooperatives can obtain benefits that can be distributed to members. Royes and Smith (2007) state
that the cooperative will return the revenues earned to its members or the number of patrons to be allocated to
members and can also be saved for future use as capital. Basically, the cooperative is not intended to seek profit,
but to maintain the business continuity of the cooperative needs to gain profit, known as SHU (Residual Result
of Business).
Data show during the period of 2010-2015, turnover and profit of cooperatives have increased. In 2010
the cooperative in Indonesia earned Rp5.6 trillion in profit with a business volume of Rp76.8 trillion, profit and
the volume of cooperative business was Rp6.3 trillion and Rp95 trillion in 2011. Then in 2012 the cooperative
profit reached Rp6.6 Trillion and turnover of cooperatives Rp119.2 Trillion. Gain and business volume in 2013
Rp8.1 Trillion with total profit Rp125.5 Trillion. In 2014 the volume of business and profit cooperatives earn
Rp189.8 Trillion and Profit Rp14.8 Trillion, the last in 2015 total profit and business volume obtained by
cooperatives each Rp17.3 Trillion and Rp266.1 Trillion. Average percentage increase in 2010 to 2015 reached
5-7%. It identifies that cooperatives can contribute to the Indonesian economy.
Meanwhile, cooperative capital in Indonesia during the last six years also increased. In 2010 the total
capital of cooperatives amounted to Rp64,7 trillion, then in 2011 and 2012, the amount of capital collected by
cooperatives amounting to Rp75,4 and Rp102,8 trillion. Capital in 2013 reached Rp170, 3 trillion or an increase
of 40% from the previous year. Total capital in 2014 and 2015 amounted to Rp200.6 and Rp242.4 trillion.
Broadly speaking, the amount of capital from 2010 to 2015 has increased quantitatively. In 2013 the rate of
capital increase reaches 40% from 2012. While in the year before and after 2013, the rate of increase in capital
only ranges from 14% to 26%. This is because in 2013 the number of active cooperatives reached 143 thousand
more with the number of cooperatives 203,701 units of cooperatives. In addition, in 2013 the existence of the
cooperative society movement launched by the ministry of cooperatives, at the international level the world
organization of the United Nations declared in 2012 as the year of cooperatives, so that affect the development
of cooperatives in 2013. The impact of the policy is that people are interested to join to become a member of the
cooperative. And this will implicate the growth of the value of capital in cultivation by members of the
cooperative against the cooperative.
Fig 1. Number of Profit, Turnover and Capital of Cooperatives in Indonesia
Cooperative and Economic Growth Indonesia
In article 33 of the 1945 of the Constitution, the foundation of economic democracy, the prosperity of
society is preferred, not the prosperity of a person. Therefore, the economy is structured as a joint effort based
The Role of Cooperative in the Indonesian Economy
www.ijhssi.org 45 | Page
on the principle of kinship. Build a company that suits it is a cooperative. But until now the role of cooperatives
has not been so visible to the Indonesian economy.
Burhanuddin (2013) states that, to date, we have not been too happy with the role that has been played
by the cooperative in the Indonesian economy. We may tend to wonder how big the role of cooperatives in our
economy. We need data. The information is somewhat less accurate and may not be accurate. Clearly the role of
cooperatives in the formation of our GDP is very small (Prof. Mubyarto once estimated about 2%, Bambang
Ismawan once mentioned 5%). Compare for example with Finland 21%, New Zealand 22%, Switzerland 16.4%
and Sweden 13%, even in newly developing Kenya, the cooperative has a 45% GDP share.
According to the minister of Cooperatives and SMEs of the Republic of Indonesia (2016), the
contribution of the cooperative sector to the Gross Domestic Product of Indonesia is only 1.7%; this figure is
very small when compared with other sectors. However, cooperatives are an important part of the economy in a
developing country because it can lead to realistic income, because cooperatives also contribute to reducing
poverty, unemployment and improving people's welfare (DeVille et al., 2007).
Cooperative and Manpower Absorption
In terms of employment, the cooperative sector is only able to contribute 0.5% of the total population
working in Indonesia. Based on data from the Central Bureau of Statistics (2016), the number of Indonesians
working as many as 186,100,917 people in 2015, while the labor absorbed in the cooperative sector is only
574,451 people. In other words, the number of cooperatives that reaches hundreds of thousands is only able to
absorb the workforce of less than 1% of total workforce in Indonesia. In 2010, the number of workers absorbed
by the cooperative reached 358,768 people. In 2011 the number of employees of the cooperative amounted to
377,236 people, there is an increase in labor by 5% from 2010. In 2012 and 2013 the absorbed workforce
reached number 431,506 and 473,604 people, while in 2014 the absorbed workforce of 567,445 people, in other
words an increase of 16% from 2013.
Recommendations for Strengthening the Role of Cooperatives in the Indonesian Economy
In quantity, the number of cooperatives in Indonesia reaches hundreds of thousands, but the active ones
was only 30% with various kinds of problems. Among the problems that arise are the low resources of managers
and participation of members. Members of the cooperative have a dual function that is as owner and user.
Cooperatives are unique, members are service users provided by cooperatives (Marwa and Aziakpono, 2014).
Therefore, to increase the level of participation of members of the cooperative, it requires continuous member
education in the hope that the productivity of the cooperative will increase. Similarly, the manager of the
cooperative, not only the pursuit of the number of members of the cooperative, but must be coupled with the
participation of members.
The role of government is also needed as a catalyst and facilitator for cooperatives. Various classical
problems experienced by cooperatives in Indonesia, such as business climate, capital and financing, and the low
human resources of cooperative people. The Government can make various efforts to help solve the problem
include: 1) Providing maximum space with the creation of a conducive climate, easy access to capital for
cooperatives and business development efforts and business cooperation; 2) Improving counseling/training and
counseling of cooperatives for managers, supervisors and officers of cooperative coaches in a sustainable
manner, through pilot projects in several provinces, which later as a model for the development of cooperatives
in Indonesia; and 3) Encouraging the perpetrators of Micro-Small and Medium Enterprises (MSMEs) to
establish cooperatives jointly at the district, provincial and central levels. Thus, the cooperative logo or symbol
as the “sokuguru” of Indonesian economy become materialized and not just as jargon only.
II. Conclusion
This study aims to describe the performance and expectations of cooperatives in Indonesia. The
number of cooperatives in Indonesia reaches 212,135 units with a total membership of 15% of the total
population of Indonesia. 30% of cooperatives in Indonesia were inactive for various reasons. Percentage of
cooperative contribution to Indonesia's gross domestic product is below 2%. While the absorption of labor, the
cooperative is only able to absorb 0.5% of the entire working population of Indonesia. Some suggestions to
enhance the contribution of the cooperative to the national economy as follows: (1) Increasing the participation
of cooperative members; (2) Providing a conducive climate for cooperatives, access to finance and business
development; (3) Increasing counseling and training for managers, supervisors and apparatus for co-operatives;
and (4) Encouraging Micro-Small and Medium Enterprises (MSMEs) to establish secondary cooperatives.
The limitation of this research is in its use of aggregate level of cooperative data as a whole, regardless
of cooperative type, such as saving and loan cooperative, agricultural cooperative, plantation and civil service
cooperative. Future researchers are advised to identify which types of cooperatives contribute more to the
Indonesian economy.
The Role of Cooperative in the Indonesian Economy
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Azhari., Syechalad, M.N., Hasan, I., and Majid, M.S.A. “The Role of Cooperative in the
Indonesian Economy”. International Journal of Humanities and Social Science Invention
(IJHSSI), vol. 6, no. 10, 2017, pp. 43–46.